All eyes on Netflix: but will it win the net TV wars?

“Netflix does seem to have a winning combination of content and price,” said Professor Wailes from the UNSW Business School. “However, it’s got stiff competition, and it remains to be seen if it will keep up the pace in the long term.”

He spoke as Netflix prepares to launch in Australia for $8.99 a month after a month-long free trial, $1 less than rivals Presto and Stan.

Professor Nick Wailes, the UNSW Business School's Associate Dean for Digital and Innovation, has been analysing the business model of the streaming video-on-demand service, which has been up and running in the US for over a decade.

“Australians are familiar with Netflix, and getting around geographical restrictions by using a Virtual IP address which makes it seem like the viewer is in the US. So it will easy for Netflix to transfer most of those views onto their ‘legal’ Australian service.”

Professor Wailes estimates that around 200,000 Australians have used either a paid for Proxy IP service, or free options which bypass geo restrictions. The government has asserted that these are legal methods of bypassing what is called the “Australia premium, whereby multinational companies charge Australians more for the same service, on the basis that consumers are used to paying more.”

“What Netflix may not anticipate however is that many Australians have a monthly data limit on their data usage. Most other countries scrapped limits years ago, but in Australia it is still seen as normal. Therefore, if you use Netflix to binge watch TV series, you’ll soon be out of your monthly data limit, and end up paying a lot more to watch movies than you planned,” he said.

He does however say that the $9 a month service is reasonably priced. “What they may have difficulty selling are the high definition services. Even though the size of TVs has ballooned in Australia, many people are happy watching slight fuzzy low-definition services. Also, many Australians have low data speeds, and they will simply be unable to watch the 4k service Netflix offer. This isn’t the case in the rest of the world, where 4k is seen as very desirable, and even low-cost supermarkets like Aldi now sell 4k TVs.”

However Professor Wailes does have one warning for Netflix. “Apple will shortly give them a run for their money, simply because Apple’s service is so easy to use. People still find the technology of plugging in a PC into a big TV hard to master, and now Apple have a simple TV box and are linking up to show HBO content. That is one competitor Netflix really doesn’t need.”